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MNSO Stock Treks Higher as Miniso Responds to Blue Orca Short Report

  • Miniso (MNSO) just responded to Blue Orca’s short report allegations.
  • Miniso says that its chairman has not committed any acts of wrongdoing.
  • Shares of MNSO stock are down more than 40% year-to-date (YTD).
red Miniso (MNSO) sign glowing at night
Source: shutterstock.com/Hendrick Wu

Miniso (NYSE:MNSO) stock is slightly in the green today after the company issued a response to Blue Orca’s short report. Blue Orca alleges that Miniso lies about its “asset-light, high-margin independent” franchise model. The firm notes that “hundreds of stores” are registered to Miniso executives or people with affiliations to the chairman.

The short seller also alleges that Miniso’s chairman improperly siphoned money from its initial public offering (IPO) via a joint venture (JV). Blue Orca says Miniso bought out the chairman’s “80% interest in the JV,” even though he never contributed any money to the JV. The firm characterizes this transaction as “effectively money for nothing.” Finally, adding fuel to the fire is the fact the JV was incorporated in the British Virgin Islands (BVI), not China.

Blue Orca believes that this transaction was a “template” for further money siphoning schemes. Now, Miniso has released a statement refuting the claims of the short report.

Let’s get into the details.

MNSO Stock: Miniso Responds to Blue Orca Short Report

Miniso says it has reported the findings of its rebuttal to the board’s Independent Committee, which was formed to address the short report.

The first issue addressed in Miniso’s response has to do with its franchise model. Miniso asserts that its retail partners are independent of the company and absorb all capital and operating expenditures. It also says store registrations explicitly mention some employees because these employees wanted to expedite the initial registration process. Miniso claims this only represented a “very small fraction” of total store counts. Further, the company has since “substantially curtailed” these “unapproved practices.”

Miniso also refutes the claim that Chairman Ye gained personally from his JV stake. In October 2021, the company bought out Ye’s 80% stake in the JV for RMB 695 million (about $103 million). This transaction was “fully and accurately disclosed” in the company’s Hong Kong IPO prospectus. Additionally, Miniso says Ye contributed as much as RMB 422.95 million ($62.7 million) to the JV through affiliates. Ye also took out a RMB 319.9 million ($47.3 million) loan through a company owned by himself.

Finally, the company’s response also addresses store closure data mentioned in the short report. Last year, the number of Miniso stores in “third- and lower-tier cities in China” increased from 1,029 to 1,307.

On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.

Article printed from InvestorPlace Media, https://investorplace.com/2022/07/mnso-stock-treks-higher-as-miniso-responds-to-blue-orca-short-report/.

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